Obscure trust links India's top businesses with Modi's election war
chest
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[March 14, 2024]
By Krishn Kaushik
NEW DELHI (Reuters) -Behind the doors of a small, non-descript office in
the heart of New Delhi lies the headquarters of an electoral trust run
by just two men that is the largest-known donor to India’s ruling
Bharatiya Janata Party (BJP), according to a Reuters review of public
records.
The Prudent Electoral Trust has raised $272 million since its creation
in 2013, funnelling roughly 75% of that to Prime Minister Narendra
Modi's party. The trust’s donations to the BJP total 10 times as much as
the $20.6 million it issued to the opposition Congress party, the
records show.
The previous Congress-led government introduced electoral trusts in 2013
to allow for tax-exempt contribution to parties. It said the mechanism
would make campaign financing more transparent by reducing cash
contributions, which are harder to trace.
But some election experts say the trusts contribute to opacity around
the funding of political parties in India, where this year’s general
election – due to be called within weeks – is expected to return Modi to
power for a rare third term, polls predict.
While Prudent does not disclose how donations made by individual
corporate donors are distributed, Reuters used public records from 2018
to 2023 to track flows from some of India’s largest companies.
Eight of India's biggest business groups donated at least $50 million in
total between 2019 and 2023 to the trust, which then issued checks for
corresponding amounts to the BJP, according to the Reuters analysis.
Four companies whose transactions were identified by Reuters - steel
giant ArcelorMittal Nippon Steel, telco Bharti Airtel, infrastructure
developer GMR and energy giant Essar - have not given money to the party
directly and do not appear on its donors' list.
GMR and Bharti Airtel said in response to Reuters questions that Prudent
determines how their donations are distributed.
Prudent decides "as per their internal guidelines, which we are unaware
of," said a GMR spokesman. He added that the company doesn't "like to
align with any political party."
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Bharti Airtel, which created Prudent before transferring control to
independent auditors Mukul Goyal and Venkatachalam Ganesh in 2014, said
it has "no influence on the decisions, directions and mode of disbursal
of funds."
Spokespeople for the other groups did not respond to calls, text
messages and emails.
Goyal and Ganesh did not respond to questions sent via email and post.
When asked on a brief phone call about how Prudent functioned, Goyal
said: "That is something we do not discuss."
Prudent - the largest of India's 18 electoral trusts - is legally
required to declare how much it has collected from each donor and the
total amounts disbursed to each party.
But it is the only one among India's four largest electoral trusts to
accept contributions from more than one corporate group.
Trusts "provide one layer of separation between firms and parties," said
Milan Vaishnav, an expert on Indian campaign finance at the Carnegie
Endowment for International Peace, a Washington-based think-tank.
Political finance in India is widely seen as murky, with most political
donations in India undisclosed, Vaishnav added.
BJP said in its latest public disclosure in March 2023 that its
political war chest - funds it had available including cash reserves and
assets - was valued at 70.4 billion rupees ($850 million). That gives it
a colossal financial advantage over Congress, which had 7.75 billion
rupees in funds.
BJP spokespeople did not respond to repeated requests for comment for
this story.
The records show that Prudent was also the largest-known donor to the
Congress party in the decade to March 2023.
LAYER OF SEPARATION
India's Supreme Court said in a February campaign finance ruling that
corporate contributions are "purely business transactions made with the
intent of securing benefits in return."
Reuters was unable to establish if political parties know the identities
of donors that give through trusts that receive contributions from
multiple groups.
MV Rajeev Gowda, head of research for Congress, told Reuters that
electoral trusts are a "semi fig-leaf" and that he believed parties knew
the donors' identities. Gowda, who doesn't manage the party's finances,
didn't provide evidence.
BJP's next largest known donor is Tata Group's Progressive Electoral
Trust, which has given the party 3.6 billion rupees collected from the
salt-to-airline conglomerate's companies. Progressive is also Congress's
next largest donor, having given it 655 million rupees.
Progressive's by-laws require it to distribute funds proportionate to
the number of seats held by each party in parliament. Prudent has no
similar restrictions and Reuters' analysis of its donations found no
such pattern.
NEAR-INSTANT TRANSFERS
Trusts are allowed to retain a maximum of 300,000 rupees for annual
operating expenses. Remaining funds must be disbursed in the fiscal year
they were received.
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BJP supporters carry a hoarding in Ahmedabad, India, December 3,
2023. REUTERS/Amit Dave/File Photo
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In its analysis of contribution reports filed by Prudent to
electoral authorities, Reuters identified 18 transactions between
2019 and 2022 in which the eight corporate groups made large
donations to the trust. Within days, Prudent issued checks for the
same amounts to BJP.
Before the 18 contributions, which are not exhaustive of all the
donations made by the groups to Prudent, the trust did not have
sufficient funds for the payments to BJP.
Companies tied to billionaire L.N. Mittal's ArcelorMittal group were
among Prudent's most prolific donors.
On July 12, 2021, for instance, ArcelorMittal Design and Engineering
Centre Private Limited gave Prudent a check for 500 million rupees
($6.03 million). The next day, Prudent issued a check to BJP for the
same amount.
ArcelorMittal Nippon Steel India also issued 200 million rupees to
Prudent on Nov. 1, 2021, and 500 million rupees on Nov. 16, 2022.
The respective sums were sent to BJP on Nov. 5, 2021, and Nov. 17,
2022.
A spokesman for ArcelorMittal did not respond to requests for
comment.
Bharti Airtel, meanwhile, issued 250 million rupees to Prudent on
Jan. 13, 2022 and 150 million rupees on March 25, 2021. The trust
sent out cheques to BJP for those amounts on Jan. 14, 2023 and March
25, 2021.
And three companies in the RP-Sanjiv Goenka group - Haldia Energy
India, Phillips Carbon Black and Crescent Power - cut cheques for
250 million rupees, 200 million rupees and 50 million rupees on
March 15, March 16, and March 19, 2021 respectively. On Mar. 17, BJP
received a 450-million-rupee cheque from Prudent; a 50-million-rupee
cheque followed on March 20.
The RPSG group did not respond to requests for comment.
Donations from Serum Institute and companies in GMR Group, DLF Ltd
and Essar Group moved to BJP immediately after Prudent received
them.
Reuters was unable to identify a similar pattern of funds being sent
to the trust and transferred to Congress immediately afterwards.
However, Reuters found similar patterns involving two regional
parties. Megha Engineering and Infrastructure transferred 750
million rupees to Prudent across three transactions on July 5 and
July 6, 2022. The trust issued a 750-million-rupee cheque on July 7
to Bharat Rashtra Samithi, a centrist party in Telangana state,
where Megha group is headquartered.
And property developers Avinash Bhosale Group, based in the western
Maharashtra state, gave 50 million rupees to Prudent on Nov. 27,
2020. The trust issued a cheque for that amount to the Maharashtra
Pradesh Nationalist Congress Party, which is independent of the
national Congress party, on Nov. 30.
The corporate groups did not immediately return requests for
comment. BRS's general secretary said he was "not aware" of
specifics about the donations, while a senior NCP official said that
the party had recently split and "every record will not be available
with us.
CAUSE OF CONCERN?
Public records and party reports show BJP's war chest has swelled
since Modi became prime minister in 2014, from 7.8 billion rupees
($94.09 million) in March 2014 to 70.4 billion rupees in March 2023.
Congress' funds increased from from 5.38 billion rupees to 7.75
billion rupees in the same time period.
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The financing gap between the BJP and Congress is a cause of
concern, said Jagdeep Chhokar of Association of Democratic Reforms,
a Delhi-based civil society group that was the main petitioner
behind the electoral bonds challenge in the Supreme Court.
"Level playing field is an essential part of democracy," he said.
Some BJP officials have said in the past that the large sums it has
raised on its books are an example of its transparency.
BJP has been the major beneficiary of electoral bonds, a mechanism
that allowed donors to give unlimited amounts to parties without
public disclosure.
It received some 65.66 billion rupees of the 120.1 billion rupees
worth of such bonds sold between their January 2018 introduction and
March 2023. Such bonds made up more than half the contributions
received by the BJP in all but one fiscal year since their
introduction.
The Supreme Court called the mechanism "unconstitutional" in
February and ordered the government-owned State Bank of India, which
issued the bonds, to release buyers' details. Specifics are set for
release by March 15.
($1 = 82.7710 Indian rupees)
(Reporting by Krishn Kaushik, Additional reporting by Aditya Kalra,
Kripa Jayaram and Sumanta Sen; Editing by Katerina Ang)
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